LONDON, June 4 (Reuters) - The Bank of England left interest rates steady at 0.5 percent on Thursday and said it was on track to complete 125 billion pounds of quantitative easing by August. However, economists expect it may have to do even more to lift Britain's economy out of recession. The decision to continue with QE and keep interest rates at a record low of 0.5 percent for a third month running was widely expected after the Bank expanded its flagship programme of asset purchases by 50 billion pounds only last month. Since then, service industry data has suggested Britain may be the first big developed economy to return to growth -- possibly as soon as this quarter -- but evidence the Bank's QE policy has been enough to kick-start the bank lending needed for sustainable growth has been lacking. "It's still possible that the committee may decide to spend more -- despite the good news from the services PMI this week, money and credit growth is not yet showing signs of improvement, which could undermine the strength of any recovery," said Colin Ellis, economist at Daiwa Securities. The Monetary Policy Committee did not say much, issuing a terse statement saying it was continuing with purchases of gilts, commercial paper and corporate bonds with newly-minted money as before and would keep the scale under review. Financial markets were little moved after the decision, with gilt futures FLGU9 briefly paring gains and sterling slightly strengthening immediately after. [ID:nL41014579] The Bank of England would need approval from finance minister Alistair Darling were it to wish to expand its quantitative easing programme by more than 25 billion pounds, taking it above the 150 billion approved in February. The MPC's meeting took place after days of speculation that Darling himself could lose his post in a government reshuffle expected in the coming days, as the ruling Labour Party braces for poor results at European and local council elections taking place on Thursday.

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